Over 18,000 people packed the CenturyLink Center in downtown Omaha. Total attendance is far above that figure, as all the overflow rooms in the Hilton Hotel across the street were fully packed as well. I woke up at 6:30am to try to secure several good seats in the arena, but alas, this vantage was the best I could do:
Warren Buffett and Charlie Munger then took questions for six hours straight (with an hour lunch break), alternating between the audience and a panel of journalists and analysts. If you’re interested, detailed notes from the meeting can be readily found online . But I’ll highlight a few insights here that were especially thought provoking to yours truly. The rhythm of their Q&A is a detailed, earnest, and sometimes long-winded answer by Warren, followed by Charlie adding a colorful sentence or two as a punctuation.
On increasing transparency on executive pay:
A: Shareholders would be harmed by more information on executive pay. Corporate CEOs’ salaries are benchmarked off of their peers, and no one thinks they are worth less than anybody else. People’s satisfaction with their earnings level is relative, not absolute. This has created a vicious cycle of upward trending C-suite salaries that cost shareholders millions every year. Munger: “We don’t want to add to the culture of envy in America.”
On See’s Candies and its significance to Berkshire:
A: Berkshire has done very well with See’s Candies, but it has not grown significantly since the ‘90s. Its main contribution has actually been opening their eyes to the power of brands. Berkshire was smart enough to buy Coca-Cola because they owned See’s – they saw the possibilities of a powerful brand. If they had not owned See’s, they may not have owned Coke. Munger: “Main contribution to Berkshire was ignorance removal. If it weren’t for the fact that we’re so good at removing ignorance, we’d be nothing today.”
On how to figure out one’s Circle of Competence:
A: Be realistic with yourself in appraising your own talents and shortcomings. Don’t be afraid to try different things to figure out where the perimeter of your circle is. Keep friends who will tell you, well, what the hell do you know about that? Munger: “If you’re 5’2”, say no to professional basketball. If you’re 350 lbs, don’t dance ballet. Competency is a relative concept.”
Miscellaneous Munger-isms:
The purpose of attending the Berkshire Hathaway annual meetings is not to seek mind-blowing epiphanies in the art of investing. Warren and Charlie’s essential lessons stay the same, and Buffett’s increasing penchant to go on TV to give his spin on what’s happening in the world means that there are very few fresh revelations during the Q&A.
Instead, it is more akin to a pilgrimage where one renews his or her “faith” in value investing. As the market’s increasing volatility continue to shake out players who once thought compounding capital an easy game, the Woodstock of Capitalism is a nourishing reminder of the time-tested method of analyzing business fundamentals rather than their ever-shifting stock prices. Stay steadfast, and trust that the scoreboard over the long run will add up in our favor.
On increasing transparency on executive pay:
A: Shareholders would be harmed by more information on executive pay. Corporate CEOs’ salaries are benchmarked off of their peers, and no one thinks they are worth less than anybody else. People’s satisfaction with their earnings level is relative, not absolute. This has created a vicious cycle of upward trending C-suite salaries that cost shareholders millions every year. Munger: “We don’t want to add to the culture of envy in America.”
On See’s Candies and its significance to Berkshire:
A: Berkshire has done very well with See’s Candies, but it has not grown significantly since the ‘90s. Its main contribution has actually been opening their eyes to the power of brands. Berkshire was smart enough to buy Coca-Cola because they owned See’s – they saw the possibilities of a powerful brand. If they had not owned See’s, they may not have owned Coke. Munger: “Main contribution to Berkshire was ignorance removal. If it weren’t for the fact that we’re so good at removing ignorance, we’d be nothing today.”
On how to figure out one’s Circle of Competence:
A: Be realistic with yourself in appraising your own talents and shortcomings. Don’t be afraid to try different things to figure out where the perimeter of your circle is. Keep friends who will tell you, well, what the hell do you know about that? Munger: “If you’re 5’2”, say no to professional basketball. If you’re 350 lbs, don’t dance ballet. Competency is a relative concept.”
Miscellaneous Munger-isms:
- “If it is a very competitive business, and requires competitive abilities you lack, you should look elsewhere. I immediately decided I wasn’t going to be thermodynamics professor at Caltech. I looked elsewhere over and over and soon there were only one or two career choices left.”
- “GEICO is like Costco. They feel a holy duty to have wonderful product and a wonderful price. Companies like that get ahead over time.”
- “Frugality has helped Berkshire. I look out at the audience and I see frugal, understated people. We collect you people.”
***
The purpose of attending the Berkshire Hathaway annual meetings is not to seek mind-blowing epiphanies in the art of investing. Warren and Charlie’s essential lessons stay the same, and Buffett’s increasing penchant to go on TV to give his spin on what’s happening in the world means that there are very few fresh revelations during the Q&A.
Instead, it is more akin to a pilgrimage where one renews his or her “faith” in value investing. As the market’s increasing volatility continue to shake out players who once thought compounding capital an easy game, the Woodstock of Capitalism is a nourishing reminder of the time-tested method of analyzing business fundamentals rather than their ever-shifting stock prices. Stay steadfast, and trust that the scoreboard over the long run will add up in our favor.
“The best way to get a good spouse is to deserve one. It is the same in business and investing. Behave correctly – it’s amazing how well it works.”
-Charlie Munger
